14 Occupied Lots
$517 / Total Rent generated per space
Let's say you assign a lot rent value of $300 / space.
The bank will be looking at the value of the park based on the land.
Let's assign a 40% expense ratio because of the heat being paid by the manager.
That brings you to an annual NOI of $30,000
Let's say given the size of the park it's a 12% Cap.
That puts a value of: $252,000.
The bank gives you a 65% LTV (size) and that puts you at:
$163,800 Loan (5%, 20 year am, 10 year term - these are just guesses..)
PMT of $13,000 / year
Downpayment needed: $105,200
Second Mortgage: $15,780
Owner carries 15% at 4%, 5 year am
PMT of $3,487 / year (he might a faster am for that small of an amount
$87K total revenue
$39K expense (44%)
You have $89,420 in equity you need to come up with.
And you'll have to include other costs - bank fees, closing fees, title insurance, 3rd party reports that the bank requires + infrastructure improvements you want to do.
So maybe you're in for $100,000.
31% CoC looks good from a financial calculation basis but some things I'd be worried about:
- Will the bank want to loan on a park this small with that many park owned homes? I haven't deal with smaller deals like this so I'm not sure what the rates, terms would be. Most of the lenders I've dealt with had minimum loan size threshholds of at $300,000 or more
- Can you run the park at a 44% expense ratio with 14 POHs? What are the age and condition of the homes? How long before you have to start to replace them? What will that replacement costs be? How much should you be putting aside to account for that? How does that affect your budget and cashflow numbers?
- As the other poster mentioned, if it's master metered... that might be more infrastructure risk than you want to carry on a park this small.
- Is there opportunity in this area long term? Do you see demand continuing to rise over time?
- Are your elderly residents on fixed incomes and would it be difficult to raise rents to capture upside and also to keep up with inflation?
A whole lot of speculation above ^^ What's the old saying? Garbage in, garbage out? Some of my assumptions may be way off but it's at least one way to view this investment and you can always plug in your numbers but still use the same analysis process.
Good luck with the opportunity! I hope it works out for you.